Two weeks deadline for businesses to register — Tax Authority

JEDDAH — The prices of goods and services for consumers should not increase once the Value Added Tax (VAT) is implemented on Jan. 1, according to the General Authority of Zakat and Tax (GAZT).

“One misunderstanding is that the VAT will be cumulative for the end consumer in that the 5% added value that will be charged in each process from the supplier to the distributer to the retailer and will finally accumulate, making it more than 5% on the end consumer,” Humoud Alharbi, project manager of VAT at GAZT, told reporters in an introductory workshop here on Wednesday.

Businesses will charge consumers VAT and will also have to pay VAT on the inputs they get from their own supplies, he said. “In net terms, it shouldn’t have any impact”, he said, explaining it’s an indirect tax. The VAT businesses are paying on one end will be offset by the VAT they’re charging at the other end and they have to pay the difference to the government, he added.

GAZT will be working with the Ministry of Commerce and Industry and The Association for Consumer Protection to administer VAT invoicing to enforce legal business and prevent black market activities.

Cash transactions, such as those commonly used in grocery stores, will be gradually limited in the coming period. “VAT invoices will record the tax paid in each transaction during the process and will limit the use of cash in the next stages,” Alharbi said, adding that each enterprise will be urged to have an automated billing system, especially large enterprises.

Businesses with annual revenues of more than SR375,000 have a transition period of one year and will be exempt from VAT in 2018. Those with more than SR1 million must register before Dec. 20 and will be subject to penalty afterwards.

When asked about the penalties, Alharbi said they vary, starting at SR10,000 and closing down the business. Businesses with annual revenues of more than SR40 million must pay their taxes on a monthly basis while others on a quarterly basis.

On tourists and pilgrims, Alharbi confirmed they will be able to receive tax returns “although airports are still not prepared” and “will need to build the infrastructure” in the meantime.

Online stores and businesses selling on social media networks will be taxed. Asked about the challenge of VAT implementation on such businesses especially those on Instagram, Alharbi said a workshop in collaboration with the Ministry of Commerce and Industry will be held to further elaborate the details of their implementation of VAT.

The most recent workshop is part of a series of some 50 workshops hosted by the GAZT authorities who are touring main cities in the country to offer guidance and support for businesses and those subject to VAT.

GAZT has signed MoUs with accounting solution and software providers to assist enterprises. SMEs are provided with free support by the Authority. A hotline (19993) has been has been introduced in addition to a new website: www.vat.gov.sa

The website includes guides, tutorials and videos to educate organizations, businesses and consumers for the upcoming VAT that will be introduced for the first time in the Kingdom.